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What GAO Found

The Navy has experienced significant quality problems with several ship classes over the past several years. It has focused on reducing the number of serious deficiencies at the time of delivery, and GAO's analysis shows that the number of deficiencies--particularly "starred" deficiencies designated as the most serious for operational or safety reasons--has generally dropped. Nonetheless, the Navy continues to accept ships with large numbers of open deficiencies. Accepting ships with large numbers of uncorrected deficiencies is a standard practice and GAO found that there are varying interpretations of Navy policy with regard to when the defects should be resolved. In 2009, the Navy organization that oversees ship construction launched the Back to Basics initiative to improve Navy oversight of ship construction. However, a key output of the initiative promoting consistent and adequate quality requirements in Navy contracts has yet to be implemented.

Although the environment in which leading commercial ship buyers and builders operate differs in many ways from the Navy's, some commercial practices aimed at helping to ensure that ships are delivered with a minimum number of deficiencies may be informative for the Navy. Throughout the course of commercial shipbuilding projects, significant numbers of quality defects and instances of non-conforming work are identified. However, leading commercial ship buyers and shipbuilders make great efforts to ensure that these issues are resolved prior to delivery. Further, commercial ship buyers establish clear lines of accountability and hold their personnel responsible for ensuring the shipbuilder delivers a quality vessel. While commercial ship buyers focus on regularly witnessing in-process work through roaming patrols and impromptu inspections, Navy processes at the shipyards place less emphasis on in-process work. Moreover, leading commercial shipbuilders have strong quality management processes that track quality problems to the worker or supervisor level. Navy shipbuilding contractors have historically experienced difficulties in holding production workers and supervisors accountable for their work, but some of the shipyards reported they are making progress on increasing worker accountability.

Why GAO Did This Study

The Navy expects to spend about $15 billion per year to provide its fleet with the most advanced ships to support national defense and military strategies. Problems with recently delivered ships have focused attention on quality issues.

House Report No. 112-110, accompanying the Department of Defense Appropriations Bill, 2012, mandated that GAO review the Navy's quality assurance processes for new ship construction. This report discusses, among other issues, (1) quality problems in constructing recently delivered ships and Navy actions to improve quality and (2) key practices employed by leading commercial ship buyers and shipbuilders to ensure quality and how these compared with Navy practices.

GAO analyzed Navy data on ship quality from 2006 to May 2013 and spoke with Navy officials and shipbuilders. GAO also reviewed deficiency data for commercial ships and spoke with buyers and builders.

What GAO Recommends

To improve the construction quality of ships delivered to the Navy, GAO is recommending, among other things, that the Navy clarify policy on when deficiencies should be addressed, provide guidance on contract quality requirements, and assess applicability of certain commercial practices to Navy shipbuilding. DOD agreed with two recommendations and partially agreed with three, stating for example that current policy is adequate but that the Navy would monitor deficiency trends. GAO believes that the recommendations remain valid as discussed in the report.

For more information, contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov.

Recommendations for Executive Action

Status: Open

Comments: The Department of Defense (DOD) concurred with this recommendation, indicating that it was formulating plans to develop a quality team within the Naval Sea Systems Command Logistics, Maintenance and Industrial Operations Directorate (NAVSEA 04). However, DOD has since determined that it is not necessary to establish a quality team in order to implement this recommendation, pointing to recent accomplishments such as developing common quality standards and establishing consistent reporting across the SUPSHIP commands. As discussed in GAO's report, there is not a quality assurance team at the NAVSEA level to which SUPSHIP quality officials can raise quality related issues and provide input on quality requirements in shipbuilding contracts. GAO continues to believe that increasing the emphasis on quality, through a dedicated quality team, can help contribute to the goal of delivering ships that are defect-free, or nearly defect-free, as called for in Navy policy and demonstrated in commercial shipbuilding.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to ensure that, when established, the Naval Sea Systems Command (NAVSEA)-level quality team provides support and a direct link to directors of Naval Sea Systems Command Supervisor of Shipbuilding, Conversion and Repair (SUPSHIP) quality assurance departments and is tasked with raising concerns within NAVSEA about issues affecting or potentially affecting quality throughout the acquisition process.

Agency Affected: Department of Defense

Status: Open

Comments: DOD partially concurred with this recommendation, noting that the Navy will monitor the alignment of the policy with the actual material condition of new construction ships at delivery to determine if future policy revisions are necessary. However, Navy Instruction 4700.8J has not been revised.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to carify Navy policy (Navy Instruction 4700.8J) by clearly identifying at what point(s) during the acquisition process contractor-responsible deficiencies are to be fully corrected and ensure the policy is followed.

Agency Affected: Department of Defense

Status: Open

Comments: DOD has not taken any action to implement this recommendation. DOD stated that department guidance and NAVSEA's Contract Administration Quality Assurance Program contain sufficient requirements for new ship construction, modernization, or repair contracts. DOD further noted that establishing a quality team within NAVSEA 04, per GAO's recommendation, would also provide input on necessary quality requirements in shipbuilding contracts. However, the Navy subsequently decided not to establish a quality team. GAO notes that no shipbuilding contract has yet implemented SUPSHIP Management Group's Quality Performance Standard for Construction of Naval Vessels, indicating that additional knowledge regarding its purpose and usage remains necessary.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to provide additional guidance on the quality requirements in shipbuilding contracts, including the extent to which the SUPSHIP Management Group's Quality Performance Standard for Construction of Naval Vessels should be incorporated.

Agency Affected: Department of Defense

Status: Open

Comments: In providing comments on this report, DOD concurred with this recommendation and according to DOD, Defense Procurement and Acquisition Policy is developing guidance on incentives and contract types for defense acquisitions. A draft was briefed to DOD's Business Senior Integration Group in May 2014 and it is anticipated the guidance will be finalized towards the end of fiscal year 2014. This recommendation will remain open pending final approval of this guidance.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to provide additional guidance on use of payment withholds and retentions as a means to incentivize the shipbuilding contractor to promptly correct significant or persistent deficiencies and to deliver a defect-free, or nearly defect free ship, to the Navy.

Agency Affected: Department of Defense

Status: Open

Comments: DOD informed GAO that the SUPSHIPs have increased shipbuilder surveillance inspections and metric-based assessments of the core shipbuilding processes, including joint collaboration with the shipbuilders on ensuring compliance with critical construction processes and implementing corrective actions early in the construction process. However, the Navy has not assessed whether adopting certain commercial quality oversight practices in effect at some SUPSHIP locations could be useful at remaining SUPSHIP locations.

Recommendation: To improve the construction quality of ships delivered to the Navy, the Secretary of the Defense should direct the Secretary of the Navy to assess the benefits and determine whether the following practices, in effect at some SUPSHIP locations, would be useful in detecting quality problems across all locations: (1) use of design drawings during SUPSHIP quality inspections, and (2) increased focus on random and in-process inspections compared to use of resources for other types of inspections and observations.